Casimir purchased one share of Norcet stock for $200 in year 1 and sold that share in year 2 for $400. The inflation rate between year 1 and year 2 was 50 percent. If the capital gains tax is imposed at a rate of 50 percent, what is Casimir's after-tax real capital gain?

Question

Quizplus · Accepted Answer

Casimir's nominal gain is $200 ($400 - $200). The real gain, considering inflation, is $0 because the $400 in year 2 is equivalent to $200 in year 1 due to 50% inflation. Therefore, the after-tax real capital gain is $0.

Casimir Purchased One Share of Norcet Stock for $200 in Year